The document discusses the meaning and types of economies. It defines economy as a system for satisfying human wants through economic activities. Economies are classified based on ownership and level of activities - capitalist economies have private ownership and minimal government interference while socialist economies have collective ownership. Mixed economies have features of both. The key features of a capitalist economy discussed are private property, freedom of enterprise, profit motive and competition. The document provides examples of capitalist countries like the US and some European nations.

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Quality Education For All

2. ECONOMICS

3. MEANING AND TYPES
OF ECONOMY
CHAPTER – 2
Part 1

4. OUTLINE OF THE LESSON

5. • The meaning and types of economics.
• The different economic systems and
identify their merits and demerits.
• The features of Indian economic structure.
• The Evaluation of the performance of
public sector in India

6. Introduction

7. Economy refers to the nature of
organization of economic activities in a
society.
Given the scarcity of resources,
economic activities are undertaken to
earn money for buying goods and
services to satisfy ones wants.

8. Depending upon the nature and level of
economic activities pursued in an economy, the
income of the people engaged in those activities
differ.
Some activities like software development
yield high and fast growing income while
others like agriculture yield low and slow
growing income.

9. Thus, countries grow faster or slower depending
on their mix of activities.
Economies with fast growing activities will
achieve development faster while others lag
behind and may remain as underdeveloped
or developing economies. They are also
known as rich or poor economies

10. The resources may be in
private ownership or collective
ownership.

11. Economies are also classified on the basis
of the administrative divisions. Thus, you
come across village economy, district
economy, state (Karnataka) economy, and
national (Indian) economies which may
be at different levels of development.

12. Meaning

13. • A.J. Brown defines economy
as “A system by which people
getaliving”.
An economy may be described
as a man-made organization
for the satisfaction of human
wants.

14. An economy as a framework of
economic institutions where all
economic activities are carried out
to improve individual and social
welfare. It is also referred to as an
economic system.

15. An economy has the following features:
i. Economy consists of individuals, economic
institutions and government and their interactions.

17. ii. Economy is a dynamic entity which is
continuously changing.
Economic institutions are
continuously created, destroyed,
replaced or changed.

18. For example:
Planning Commission was set up to plan for socio-
economic development of India in 1950, but it was
replaced by NITI Ayog in 2015.

19. Example 2
Earlier, barter system was followed but today money
plays a vital role in economic transactions.
Barter system Money

20. iii. Production, consumption and
investment are the crucial activities of an
economy.

21. iv. Depending on the type of economy,
economic activities keep on changing.
Four Types of Economic Activities
•Primary activities.
•Secondary Activities.
•Tertiary activities:
• Quaternary services: providing information services

22. In developing economy -low income
yielding primary (resource based)
activities are predominant
In developed countries high income
yielding secondary (manufacturing) and
tertiary(service based) activities are
predominant.

23. V. Individuals are both producers and
consumers. As producers they produce goods
and services and as consumers they consume
the same. However, we are all consumers but
only few of us are producers.

24. Vi. Modern economic system is complex and
there are many institutions to regulate the
activities of the individuals. Thus, we have
institutions like the RBI, SEBI, World Bank,
IMF, WTO, SAARC, ADB, etc., that govern the
activities of individuals as well as countries.

25. RBI : Reserve Bank of India;
SEBI : Securities and Exchange Board of
India,
IMF : International Monetary Fund
WTO : World Trade Organization,
SAARC : South Asian Association for Regional
Co-operation ADB : Asian Development Bank
Abbreviations:

26. Capitalist, Socialist and
Mixed Economies

27. Economic systems are classified into
capitalism, socialism and mixed
economies based on ownership of
means of production and extent of
government intervention and
regulation of economic activities.

28. Capitalist Economic System

29. In a capitalist system, the means of production
are owned by the individuals and are free to
use them in any way that benefits them.

30. Also called a free enterprise economy.
Government intervention in the economic
activities is minimal or zero.

31. The important features of a
capitalist economy are as follows:

32. i. Private property: An individual is free to own,
acquire and bequeath property according to
his/her wish.
ii. Freedom of enterprise: In a capitalist
economy the individuals are free to choose
any occupation.

33. iii. Consumer’s Sovereignty: It is said that the
consumer is a king in capitalist economy.
Production is guided by consumer’s choices.
iv. Profit Motive: self-interest

34. v. Competition, markets and prices: The
market forces of demand and supply
freely operate to determine the price.
vi. Absence of government interference:
Either absent or kept to the minimum

35. Pure capitalism is not seen in the world in today’s
world as the government has assumed an active role
in economic development, promoting welfare of the
people and regulating economic activities of
business firms. USA and many countries of Europe
are more capitalist in nature.
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